Even as the economic downturn continues battering the IT sector, Cisco (NASDAQ:CSCO) chief John Chambers said the company remains on-track with a number of high-profile efforts that will put his company on a collision course with other giants of the enterprise, like HP.

Cisco entered the blade server marketplace in March with its Unified Computing System (UCS), signaling a move to capture a greater share of the datacenter market but opening itself up to new competition from partners like HP (NYSE:HPQ) at the same time.

Chambers, however, isn't afraid of the new competition. In fact, he's confident that despite a challenging economic climate, his company will prevail by sticking to his recession playbook.

The challenges of the economy aren't trivial. Cisco yesterday reported third-quarter fiscal 2009 earnings, seeing net income drop 21 percent from a year ago -- down to $1.3 billion or $0.23 per share. Still, on a before-charges basis, net income came in at $0.30 per share, five cents greater than Wall Street expectations, according to Reuters Estimates.

Net revenue at Cisco for the quarter hit $8.2 billion, a decrease of 17 percent on a year over year basis, but ahead of analyst estimates of $8.1 billion in revenue.

Moving forward, Chambers continues to see declines ahead, and said next quarter would see revenues down by 17 to 20 percent on a year-over-year basis.

Partners become rivals

Though the numbers might seem grim, last quarter proved a big one for Cisco in terms of new product announcements.

The biggest, no doubt, was the launch of Cisco's UCS system -- which marks the company's entry into the server space, where it will now compete against HP, IBM, Dell and other server vendors.

In response to an analyst question about Cisco's new competitive stance against HP and IBM -- longtime partners -- during yesterday's earning call, Chambers provided a blunt retort.

"While some of the partners in the past will be partners in the future, when you are going into new areas, you are going to have different partners," Chambers said. "So as you think about it, think about most of the demand we deliver to our partners. It is created by Cisco. That can be easily moved to other areas. It is not all of it, but it is a vast majority."

Chambers added that there will be times that IBM and others also partner with and compete against the same vendor. IBM recently ramped up its network partnership with Brocade and with Juniper Networks, for instance.

"Cisco has always believed that disruption creates opportunity," Chambers said. "There is little doubt this disruption in the datacenter will accelerate in the next 12 months due to the rapidly changing technology trends such as the rise of scalable, processing and virtualization."

"The competitive landscape is changing, and while a new class of very large, well-financed and aggressive competitors will bring their own product categories to aggressive new markets, we believe the network will be the intersection of innovation through an open ecosystem and standards."

Cisco also has been making bold moves outside of the datacenter. During the quarter, Cisco acquired Pure Digital, makers of the handheld Flip video recorder for $590 million.

Chambers said he sees Cisco's video play both in the home and the enterprise as being key to its future success.

"With the pending addition of Pure Digital with the Flip video capability, customers are getting a concept of how video plays out from the device, through intelligent networks combined with system security all the way to telepresence," Chambers said.

"In simple terms, any device over any combination of networks with any content with video is not just the killer application in terms of network load, but probably the most important architectural play in the next generation of the Internet."